India’s residential market witnesses supply increase in the first half of 2013

​NEW DELHI,
September 12, 2013: Despite the prevalent economic uncertainty,
residential supply in key markets across the country witnessed an increase in
the first half of 2013 – accordingto CBRE’s latest
report on the residential segment, ‘India Residential Market View H1 2013’.

According to the
report, more than 65,000 units were launched across India’s leading cities
during the period under review, as compared to about 48,000 units launched
during the second half of 2012. About 88% of this supply was concentrated in
the Delhi-NCR, Mumbai and Bangalore markets – indicating their prominence as
residential investment destinations. Most new launches across these cities were
in peripheral areas, and in the mid-end segment – to cater to the rising demand
for affordable housing in view of the current economic situation.

As buyers faced
a scenario of high price points amidst sticky borrowing costs, demand remained largely
sluggish across most markets. The supply/demand mismatch also contributed to an
oversupply situation in most cities, leading to mixed sentiments on asset
pricing across various cities. Subdued demand levels led to a
correction (around 9-12%) in capital values across most markets of Delhi. Values
in prime areas of South and Central Mumbai remained stagnant; while Western
Suburbs, Extended Eastern Suburbs, Navi Mumbai and Thane witnessed capital
appreciation in the range of about 8-11% as compared to the second half of
2012. In addition, values in North Bangalore appreciated by around 8-10%, while
the more established Central, Off Central and Southern locations witnessed an
increment of 4-6% in the premium segment.

A cautious
buyer sentiment held up a steep appreciation across most micro-markets, with
suburban locations witnessing slower price increments compared to previous
review periods. Buyers remained cautious of making investments as current price
points in most leading cities (especially Mumbai and the NCR) seemed inflated.
In the leasing market, sentiments were mixed across various cities; and rental
values dipped in select locations in NCR and Mumbai, while witnessing
appreciation in Bangalore and Pune.

Commenting on the findings of the report, Mr. Anshuman Magazine, Chairman and
Managing Director of CBRE, South Asia Pvt. Ltd. said,“India’s economic growth
prospects continued to face strong challenges from a depreciating currency,
weak industrial output and a stagnating policy environment, thereby hurting
investor sentiment in the real estate sector. RBI’s latest ruling on
disbursement of loans on special schemes will further impact the residential
market across most micro markets. I expect the market to remain sluggish in the
short to medium term. NRI investments, however, might witness an increase owing to the depreciating
value of the rupee.”

Capital values across
most markets are expected to remain stable over the coming few months, as
investor as well as end user sentiments are likely to remain cautious. The TDS
of 1% on immovable property above INR 5 million is likely to have an adverse
impact on housing sales, particularly in the premium segment. Easing mortgage rates may act as a sentiment booster; however the
oversupply situation is likely to weigh on asset pricing. The recent notification
by the Central Bank directing banks and home loan firms to remain vary of 80:20
home loan schemes, and linking home loan disbursals with a project’s
construction status might impact credit availability in the market. This could
slowdown construction of numerous projects and ultimately impact residential sales,
especially in the mid-end category.

CBRE was the first independent international
real estate consultancy to set up offices in the Indian Sub-continent with an
office in New Delhi in 1994. Since then the India operations has grown to a
network of offices in all the major metropolitan cities. Today with over 2600
professionals, CBRE South Asia Pvt. Ltd. is one of the leading real estate
consultants in the Indian subcontinent. We provide our clients with a number of
services in the core areas of Strategic Consulting, Capital Markets,
Valuations/ Appraisals, Agency Services, Asset Services and Project Management.
Our guiding principle has been to provide our clients with tactical and
strategic solutions that make real estate holdings more productive and
economically efficient. Please visit our web site at www.cbre.co.in

Disclaimer:

Neither CBRE nor its affiliated companies make any warranties or claims on the implied accuracy of the information contained herein.